Stocks Continue To See Substantial Weakness In Mid-Day Trading - U.S. Commentary

4/9/2012 12:10 PM ET

With traders reacting negatively to Friday's disappointing jobs report, stocks continue to see significant weakness in mid-day trading on Monday. Selling pressure has waned from earlier in the session, but the markets continue to experience broad based weakness.

The major averages are off their worst levels of the day but remain firmly in negative territory. The Dow is down 140.88 points or 1.1 percent at 12,919.26, the Nasdaq is down 33.52 points or 1.1 percent at 3,046.98 and the S&P 500 is down 16.94 points or 1.2 percent at 1,381.14.

Stocks moved sharply lower at the start of trading as traders finally had a chance to respond to the Labor Department's monthly employment report, which was released while the markets were closed last Friday. The report showed much weaker than expected job growth in the month of March.

The Labor Department said that non-farm payroll employment increased by 120,000 jobs in March, while economists had expected the addition of about 201,000 jobs

Despite the weaker than expected job growth, the unemployment rate unexpectedly edged down to 8.2 percent in March from 8.3 percent in February. With the unexpected drop, the unemployment rate fell to its lowest level since coming in at 7.8 percent in January of 2009.

However, James Knightley, senior economist at ING, noted that the drop in the unemployment rate was "only caused by the size of the workforce falling by less than the drop in the number of people unemployed, with household employment down 31,000."

The disappointing jobs data has led to renewed concerns about the economic outlook and inspired some traders to cash in on the strong upward move seen in recent months.

In corporate news, shares of AT&T (T) are down by 1.1 percent after the telecom giant announced that it has agreed to sell its AT&T Advertising Solutions and AT&T Interactive units to an affiliate of Cerberus Capital Management.

Under the terms of the agreement, AT&T will receive a 47 percent equity interest in the new entity, YP Holdings LLC.

Meanwhile, AOL Inc. (AOL) has jumped by 46.4 percent after announcing an agreement to sell over 800 of its patents and their related patent applications to Microsoft (MSFT) for more than $1 billion. The company said it intends to return a significant portion of the sale proceeds to shareholders.

Sector News

Most of the major sectors have shown notable moves to the downside on the day, reflecting the broad based weakness in the markets.

Health insurance stocks are posting particularly steep losses, dragging the Morgan Stanley Healthcare Payor Index down by 6.6 percent. The loss by the index comes after it ended the previous session at a record closing high.

Molina (MOH) and Centene (CNC) are turning in two of the health insurance sector's worst performances, tumbling by 24.5 percent and 13.8 percent, respectively. The losses come after Ohio did not select the companies to administer its Medicaid program.

Financial stocks also continue to see significant weakness on the day, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index both down by 2.3 percent.

Considerable weakness is also visible among healthcare provider stocks, as reflected by the 2.3 percent loss being posted by the Morgan Stanley Healthcare Provider Index. Biotechnology, trucking, and defense stocks are also posting notable losses.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved lower on Monday, although several markets were closed for public holidays. Japan's Nikkei 225 Index fell by 1.5 percent, while China's Shanghai Composite Index dropped by 0.9 percent.

Meanwhile, the major European markets all remained closed on the day amid a continuation of the long holiday weekend.

In the bond market, treasuries are seeing some further upside after showing a strong upward move in Friday's abbreviated session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.7 basis points at 2.023 percent.